Baku, Azerbaijan, Feb. 18
By Elena Kosolapova - Trend:
Standard & Poor's Ratings Services lowered its long-term foreign and local currency sovereign credit ratings on the Republic of Kazakhstan to 'BBB-' from 'BBB', the agency said Feb. 18.
At the same time, S&P lowered the short-term foreign and local currency ratings to 'A-3' from 'A-2'. The outlook on the long-term ratings is negative.
In mid-January 2016, S&P materially lowered its oil price assumptions for the period 2016-2019.
Prices for crude oil in spot and futures markets are about 70 percent below mid-2014 levels, when prices began to slide. When S&P last reviewed Kazakhstan in September 2015, the agency expected Brent oil prices to average $65 per barrel (/bbl) in 2016 and $75/bbl in 2017 and beyond. S&P now assumes an average Brent oil price of $40/bbl in 2016 and $45/bbl in 2016-2019, the statement said.
S&P does not expect the Feb. 16, 2016, agreement between oil ministers from Qatar, Russia, Saudi Arabia, and Venezuela to freeze output at the levels reported in January to have a material impact on our oil price assumptions.
On the demand side, S&P sees China's economic slowdown and debt load as a continuing top global risk, the statement said.
Since Kazakhstan's economy depends heavily on the oil sector--it accounts for an estimated 20% of GDP, 50% of fiscal revenues, and 60% of exports-the agency now expects GDP growth to stagnate or to contract modestly in 2016.
This will likely stem from weaker exports and our forecast of roughly flat oil production (unless the large offshore Kashagan oil field comes fully on stream earlier than 2018), as well as reduced domestic consumption due to the tenge devaluation, high inflation, and weak consumer lending. S&P then expects a moderate economic recovery in 2017-2019, as consumption and investments.
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